Methanex Reports Improved Q2 Results on Methanol Price Strength.Business Editors Methanex Corporation recorded net income of US$15.7 million (US$0.12 per share) and generated EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (earnings before interest, income taxes, depreciation and amortization) of US$52.0 million for the second quarter ended June June: see month. 30, 2002. The second quarter 2002 results compare to a net loss of US$17.4 million (US$0.13 per share) and EBITDA of US$10.6 million for the first quarter 2002, and to net income of US$40.3 million (US$0.25 per share) and EBITDA of US$86.8 million for the same period in 2001. Pierre Pierre (pēr), city (1990 pop. 12,906), state capital (since 1889) and seat of Hughes co., central S.Dak., on the east bank of the Missouri River, opposite Fort Pierre; inc. 1883. Choquette, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Methanex commented, "We are now beginning to realize the benefits of tight methanol methanol, methyl alcohol, or wood alcohol, CH3OH, a colorless, flammable liquid that is miscible with water in all proportions. Methanol is a monohydric alcohol. It melts at −97. market conditions that started late in the first quarter. At US$138 per tonne tonne measure of weight or mass; 1 tonne=1000 kg. See also ton. , our average realized price for the second quarter was 24% higher than first quarter levels. Pricing strength is continuing into the third quarter. Our non-discounted US reference price for July July: see month. is US$206 per tonne (US$0.62 per gallon gallon: see English units of measurement. ), up from US$140 per tonne (US$0.42 per gallon) three months earlier. In addition, the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. third quarter 2002 contract list price is EURO 208, or approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. US$205 per tonne (US$0.62 per gallon), a 43% improvement over the second quarter. Our low cost position combined with this strong methanol price environment should translate (1) To change one language into another; for example, assemblers, compilers and interpreters translate source language into machine language. (2) In computer graphics, to move an image on screen without rotating it. into even stronger financial results for the third quarter. The current tight methanol market conditions are further supported by the fact that there is minimal new capacity due to impact the market prior to 2004." Mr. Choquette continued, "During the second quarter we were pleased to raise US$200 million through the issue of 8.75% senior notes due August 15, 2012. The proceeds will be used to repay the US$150 million 7.40% notes due August 15, 2002 and for general corporate purposes." Mr. Choquette followed, "We continue to enjoy excellent financial strength and flexibility. Cash on hand at the end of June 2002 was US$441 million, of which US$150 million will be used to repay the notes due August 2002, and we also have an undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely US$291 million credit facility." Mr. Choquette concluded, "We have the financial capacity to complete our capital maintenance spending program, fund our equity contribution for the construction of our new plant in Trinidad Trinidad (trēnēthäth`), town (1983 est. pop. 43,500), Sancti Spíritus prov., central Cuba. Tobacco processing is the chief industry, although other agricultural processing has been developed. , repay the notes due August 2002 and pursue new opportunities to enhance our strategic position in methanol." A conference call is scheduled for Thursday Thursday: see week. , July 18 at 11:00 am EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT (8:00 am PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT ) to review these second quarter results. To access the call, dial the Telus Conferencing See teleconferencing. operator ten minutes prior to the start of the call at (416) 883-0139, or toll free at (888) 458-1598. The security passcode for the call is 75577. A playback Playback could mean:
Methanex is a Vancouver Vancouver, city, Canada Vancouver, city (1991 pop. 471,844), SW British Columbia, Canada, on Burrard Inlet of the Strait of Georgia, opposite Vancouver Island and just N of the Wash. border. based, publicly-traded company engaged in the worldwide production and marketing of methanol. Methanex shares are listed for trading on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of under the trading symbol Trading symbol See: Ticker symbol "MX" and on the Nasdaq National Market in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. under the trading symbol "MEOH MEOH Methyl Alcohol ." Information in this news release and the attached management's discussion and analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . By their nature, such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. They include world-wide economic conditions, the availability and cost of gas feedstock feed·stock n. Raw material required for an industrial process. Noun 1. feedstock - the raw material that is required for some industrial process raw material, staple - material suitable for manufacture or use or finishing , the ability to implement business strategies and pursue business opportunities, conditions in the methanol and other industries including the supply and demand for methanol and the risks attendant ATTENDANT. One who owes a duty or service to another, or in some sort depends upon him. Termes de la Ley, h.t. As to attendant terms, see Powell on Morts. Index, tit. Attendant term; Park on Dower, c. 1 7. with producing and marketing methanol and carrying out major capital expenditure projects. Please also refer to page 28 of our 2001 Annual Report for more information on forward-looking statements. Interim Report For the three months ended June 30, 2002 At June 30, 2002, the number of common shares outstanding was 125,729,542. Contact Information Methanex Investor Relations Investor relations The process by which the corporation communicates with its investors. 1800 - 200 Burrard Street Burrard Street is a major thoroughfare in Vancouver, British Columbia, Canada. It is the central street of Downtown Vancouver and the Financial District. The street is named for Burrard Inlet, located at its northern terminus, which in turn is named for Sir Harry Burrard. Vancouver, BC Canada V6C 3M1 Share Information Methanex Corporation's common shares are listed for trading on the Toronto Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing exchange under the symbol MX and on The Nasdaq Stock Market Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies. under the symbol MEOH. Transfer Agents & Registrars CIBC CIBC Canadian Imperial Bank of Commerce CIBC Centres Interinstitutionnels de Bilan de Compétences CIBC Commonwealth Institute of Biological Control (Trinidad) CIBC Commercial International Brokerage Company Mellon Trust Company 393 University Avenue, 5th Floor Toronto, Ontario Ontario, city, United States Ontario, city (1990 pop. 133,179), San Bernardino co., S Calif., near Los Angeles, in a region of vineyards; inc. 1891. , Canada M5G 2M7 Toll free in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. : 1-800-387-0825 Investor Information All financial reports, news releases and corporate information can be accessed on our web site at www.methanex.com. E-mail: invest@methanex.com Methanex Toll-Free: 1-800-661-8851 Management's Discussion and Analysis Except where otherwise noted, all currency amounts are stated in United States dollars. This second quarter, 2002 Management's Discussion and Analysis should be read in conjunction with the annual consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge and the Management's Discussion and Analysis included in the 2001 Annual Report.
----------------------------------------------------------------------
($ millions, except where noted) 2002 2001
Three Three Six Three Six
months months months months months
ended ended ended ended ended
June 30 March 31 June 30 June 30 June 30
-----------------------------------------
Sales volumes (thousands
of tonnes)
Company produced 1,489 1,431 2,920 1,296 2,541
Purchased and commission 312 352 664 550 1,176
-----------------------------------------
1,801 1,783 3,584 1,846 3,717
Average realized methanol
price ($ per tonne) $ 138 $ 111 $ 125 $ 200 $ 213
Net income (loss) $ 15.7 $(17.4) $ (1.7) $ 40.3 $109.1
EBITDA(1) $ 52.0 $ 10.6 $ 62.6 $ 86.8 $209.7
Operating income (loss) $ 23.1 $(17.5) $ 5.6 $ 60.0 $155.4
Cash flows from operating
activities(2) $ 46.5 $ 10.0 $ 56.5 $ 78.0 $184.6
Basic and diluted net income
(loss) per share $ 0.12 $(0.13) $(0.01) $ 0.25 $ 0.67
----------------------------------------------------------------------
(1) EBITDA represents net income (loss) before income taxes, interest expense, interest and other income, depreciation and amortization, and asset restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , if any. EBITDA can be calculated by adding depreciation and amortization back to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . EBITDA should be considered in addition to, and not as a substitute for, operating income (loss), net income (loss), cash flows and other measures of financial performance reported in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . EBITDA differs from cash flows from operating activities before changes in non-cash working capital and the utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. natural gas primarily because it does not
include cash flows from interest, income taxes and asset restructuring
charges. Our method of computing computing - computer EBITDA may not be comparable to
similarly titled measures reported by other companies.(2) Before changes in non-cash working capital and the utilization of prepaid natural gas. Results from Operations For the second quarter ended June 30, 2002, we recorded net income of $15.7 million ($0.12 per share) and EBITDA of $52.0 million. This compares to a net loss of $17.4 million ($0.13 per share) and EBITDA of $10.6 million for the first quarter ended March 31, 2002 and net income of $40.3 million ($0.25 per share) and EBITDA of $86.8 million for the second quarter ended June 30, 2001. For the six month period ended June 30, 2002, we recorded a net loss of $1.7 million ($0.01 per share) and EBITDA of $62.6 million compared with net income of $109.1 million ($0.67 per share) and EBITDA of $209.7 million for the same period in 2001.
EBITDA
The change in EBITDA resulted from:
($ millions) Q2-2002 Q2-2002 YTD Q2-2002
compared with compared with compared with
Q1-2002 Q2-2001 YTD Q2-2001
------------------------------------------
Higher (lower) realized
price of produced methanol 40 (92) (260)
Lower cash cost - 31 58
Higher sales volume of
produced methanol 1 18 40
Higher margin on the sale
of purchased methanol 1 8 13
Other, net (1) - 2
------------------------------------------
Increase (decrease) in
EBITDA 41 (35) (147)
------------------------------------------
Higher (lower) realized price of produced methanol - Methanol prices are characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by volatility and are affected by the methanol demand / supply balance, which is influenced by global industry capacity, industry operating rates Operating rate The percentage of total production capacity of a company, industry, or country that is being used. operating rate The portion of capacity at which a business operates. and the strength of demand. Shutdowns of high cost capacity resulted in a tight demand / supply balance and higher methanol prices from mid- mid- pref. Middle: midbrain. 2000 to mid-2001. Methanol prices declined substantially in the second half of 2001, consistent with general economic conditions, and remained low in the first quarter of 2002. Supply limitations combined with some early signs of a recovery in demand have resulted in tight market conditions and higher methanol prices during the second quarter of 2002 and into the third quarter. Our average realized price for the second quarter of 2002 of $138 per tonne was $27 per tonne, or 24%, higher than the first quarter of 2002 price of $111 per tonne. The higher average realized price for produced methanol resulted in a $40 million increase in EBITDA in comparison with the first quarter of 2002. Lower cash cost - The most significant components of our cash costs are natural gas costs and distribution costs distribution costs distribute npl → Vertriebskosten pl associated with delivering methanol to customers from our production facilities. Our cash costs for the second quarter of 2002 remained consistent with the first quarter of 2002 as lower natural gas costs for our facilities in Chile Chile (chĭl`ē, Span. chē`lā), officially Republic of Chile, republic (2005 est. pop. 15,981,000), 292,256 sq mi (756,945 sq km), S South America, west of the continental divide of the Andes Mts. were primarily offset by increased natural gas costs for our Kitimat Kitimat (kĭt`ĭmăt'), town (1991 pop. 11,305), W British Columbia, Canada, at the head of Douglas Channel. It is the site of a huge aluminum smelter (opened 1954), pulp and paper mills, and a petrochemical plant. Kitimat has a deepwater anchorage. facility. Our cash costs decreased by $31 million for the second quarter of 2002 compared with the same period in 2001 and decreased by $58 million for the six-month period ended June 30, 2002 compared with the same period in 2001. Approximately half of the cash cost improvement for both periods relates to lower natural gas costs in Chile and North America. The remainder of the decrease in cash costs relates primarily to lower fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). because of the shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down of the Medicine Hat facility during the second half of 2001 and to lower ocean freight and other logistics logistics In military science, all the activities of armed-force units in support of combat units, including transport, supply, communications, and medical aid. The term, first used by Henri Jomini, Alfred Thayer Mahan, and others, was adopted by the U.S. costs. The decrease in ocean freight costs is a result of focussed initiatives to reduce our vessel costs and more efficient shipping patterns. Our other logistics costs are lower primarily because of a decrease in the European import duty rate and lower overall duties as a result of lower methanol prices. Higher sales volume of produced methanol - The increase in sales volume of produced methanol is primarily the result of higher production volumes at our facilities in 2002. Higher margin on the sale of purchased methanol - We earned a margin of $2 million on the sale of purchased methanol in the second quarter of 2002 compared with a margin of $1 million in the first quarter of 2002 and a loss of $6 million in the second quarter of 2001. For the six-month period ended June 30, 2002 we earned a margin of $3 million compared with a loss of $10 million for the same period in 2001. Depreciation and Amortization Depreciation and amortization expense for the second quarter of 2002 was $29 million compared with $27 million for the second quarter of 2001. For the six-month period ended June 30, 2002 depreciation and amortization expense was $57 million compared with $54 million for the same period in 2001. The increase for both periods primarily relates to an increase in the volume of produced methanol sold. Interest Expense and Interest and Other Income Interest Expense - Interest expense for the second quarter of 2002 was $7 million compared with $8 million for the second quarter of 2001. For the six-month period ended June 30, 2002 interest expense was $13 million compared with $16 million for the same period in 2001. The decrease for both periods is primarily due to the capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. of interest for the construction of the Atlas Atlas, in Greek mythology Atlas (ăt`ləs), in Greek mythology, a Titan; son of Iapetus and Clymene and the brother of Prometheus. methanol facility in Trinidad. Interest and Other Income - Interest and other income for the second quarter of 2002 was $4 million compared with $5 million for the second quarter of 2001. For the six-month period ended June 30, 2002 interest and other income was $6 million compared with $9 million for the same period in 2001. A decrease in interest income in 2002 relating mainly to lower interest rates was primarily offset by foreign exchange gains recorded during the second quarter of 2002. Income Taxes The effective income tax rate for the second quarter of 2002 was 24% compared with 28% for the second quarter of 2001. Operating Performance For the quarter ended June 30, 2002, we operated our production facilities, excluding the idled Medicine Hat and Fortier Fortier can refer to: People
Demand/Supply Fundamentals The demand/supply fundamentals are currently very favourable. Unplanned methanol plant outages in the first quarter of 2002 and into the second quarter, particularly in Asia, the Middle East and Africa continue to impact the methanol market. Unplanned methanol plant outages have been typical of historical industry operating performance. These industry supply limitations combined with some early signs of a recovery in demand as the global economy starts to improve have resulted in low inventory levels, tight market conditions and higher methanol prices at a time when only limited new capacity is expected to impact the market to the end of 2003. Methanol prices strengthened significantly during the second quarter of 2002 and remain strong early in the third quarter. The Methanex non-discounted U.S. reference price is $206 per tonne ($0.62 per gallon) for July compared with $140 per tonne ($0.42 per gallon) for April. In Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , the third quarter of 2002 contract transaction price
settled at EURO 208 before discounts ($205 per tonne at the time of
settlement) an improvement of EURO 63, or 43%, over the second quarter
of 2002. Spot prices in the United States are currently approximately
$213 per tonne ($0.64 per gallon). Prices in Asia are currently between
$175 and $189 per tonne.MTBE MTBE Methyl-tert-butyl-ether Surgery An aliphatic ether that rapidly dissolves cholesterol stones in vivo, introduced under local anesthesia via a percutaneous transhepatic cholecystectomy catheter, as a non-invasive method for treating gallstones; after injection, In April 2002, the U.S. Senate passed a comprehensive energy bill that included a provision to ban MTBE in the United States within four years of its enactment. The U.S. House of Representatives has also passed an energy bill, but it does not contain a provision to ban MTBE. The Senate and the House must proceed to conference to determine whether energy legislation can be agreed to by both parties and then passed by the U.S. Congress. It is uncertain whether the energy legislation will be agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy and passed by the whole U.S. Congress and if passed whether it will include a provision to ban MTBE. Strategic Initiatives Low-Cost Methanol Production Capacity We are continuing to assess an 840,000 tonne per year expansion of our facility in Chile and the construction of a 2.0 million tonne per year methanol plant in Western Australia Western Australia, state (1991 pop. 1,409,965), 975,920 sq mi (2,527,633 sq km), Australia, comprising the entire western part of the continent. It is bounded on the N, W, and S by the Indian Ocean. Perth is the capital. . We expect to make final decisions on both of these projects within the next year. Liquidity and Capital Projects Cash flows from operating activities before changes in non-cash working capital and the utilization of prepaid natural gas in the second quarter of 2002 were $46 million compared with $10 million for the first quarter of 2002. On June 19, 2002 we completed the issue of $200 million 8.75% senior notes due August 15, 2012. The proceeds will be used to repay the $150 million 7.40% notes due August 15, 2002 upon their maturity and for general corporate purposes. We also successfully completed a solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of consents to an amendment to the indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. to modify the limitation on restricted payments covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our 7.75% notes due August 15, 2005. Under the amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. indenture, we are permitted to declare TO DECLARE. To make known or publish. By tho constitution of the United States, congress have power to declare war. In this sense the word, declare, signifies, not merely to make it known that war exists, but also to make war and to carry it on. 4 Dall. 37; 1 Story, Const. Sec. and pay up to $30 million of dividends in any twelve-month period while our consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net worth is less than $850 million. There is no restriction restriction - A bug or design error that limits a program's capabilities, and which is sufficiently egregious that nobody can quite work up enough nerve to describe it as a feature. on paying dividends while consolidated net worth is above $850 million. During 2001 we commenced a share buyback Buyback The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may program to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. up to 11.5 million common shares pursuant to a normal course issuer bid, which expires on August 9, 2002. As at June 30, 2002 we had repurchased 8.5 million shares for a total cost of $57 million. The Atlas project is a 1.7 million tonne per year methanol facility being constructed in Trinidad as a joint venture between Methanex (63.1%) and BP (36.9%). Construction is well advanced and is expected to be completed by late 2003. During the quarter ended June 30, 2002, our cash contribution to the Atlas project was $26 million. As at June 30, 2002, our total cash contribution to the project was $92 million, excluding the $17 million payment made in the third quarter of 2001 to acquire Beacon Beacon, city (1990 pop. 13,243), Dutchess co., SE N.Y., on the E bank of the Hudson River; settled 1663, inc. in 1913 when Fishkill Landing and Matteawan villages were united. Energy Investment Fund's interest in the Atlas project. Our total equity contribution to the joint venture, excluding the Beacon payment and assuming project financing Project financing A form of asset-based financing in which a firm finances a discrete set of assets on a stand-alone basis. is arranged as planned, is expected to be approximately $100 million. We plan to complete the project financing during the third quarter. We have excellent financial capacity and flexibility. Our cash balance at June 30, 2002 was $441 million, of which $150 million will be used to repay the notes due August 2002. We also have an undrawn $291 million credit facility. The planned capital maintenance expenditure program directed towards major maintenance, turnarounds and catalyst catalyst, substance that can cause a change in the rate of a chemical reaction without itself being consumed in the reaction; the changing of the reaction rate by use of a catalyst is called catalysis. changes is estimated to total less than $80 million for the period to the end of 2004. We have the financial capacity to complete the capital maintenance spending program, fund our equity contribution for the construction of Atlas, repay the $150 million public bonds due in August 2002 and pursue new opportunities to enhance our strategic position in methanol. Short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. Outlook Supply disruptions and early signs of a recovery in demand have resulted in tight market conditions, low inventory levels and significantly improved methanol pricing into the third quarter. In addition, only limited new capacity is expected to impact the market to the end of 2003. In this environment, we will continue to focus on maximizing the value generated from our low cost facilities and global market position. The methanol price, however, will ultimately depend on industry operating rates and the strength of global demand. We believe that our excellent financial position and financial flexibility, outstanding global supply network and low cost position will ensure that Methanex continues to be the leader in the methanol industry.
July 17, 2002
Methanex Corporation
3 months 6 months
Consolidated Statements of Income ended ended
(unaudited) June 30 June 30
----------------------------------------------------------------------
(thousands of U.S. dollars, 2002 2001 2002 2001
except number of shares and per
share amounts)
Revenue $223,563 $341,114 $405,290 $714,056
Cost of sales and operating
expenses 171,535 254,325 342,690 504,361
Depreciation and amortization 28,959 26,824 57,012 54,284
----------------------------------------------------------------------
Operating income before
undernoted items 23,069 59,965 5,588 155,411
Interest expense (6,619) (8,297) (13,270) (16,438)
Interest and other income 4,111 4,709 6,476 8,994
----------------------------------------------------------------------
Income (loss) before income taxes 20,561 56,377 (1,206) 147,967
Income tax expense (4,890) (16,058) (500) (38,870)
----------------------------------------------------------------------
Net income (loss) $ 15,671 $ 40,319 $ (1,706) $109,097
Retained earnings, beginning of
period 373,370 453,610 397,310 384,832
Excess of repurchase price over
assigned value of common shares (12,594) - (19,157) -
----------------------------------------------------------------------
Retained earnings, end of period $376,447 $493,929 $376,447 $493,929
----------------------------------------------------------------------
Weighted average
number of common 162,371,459 161,772,225
shares outstanding (a) 126,965,224 128,291,902
Basic and diluted net income
(loss) per common share $ 0.12 $ 0.25 $ (0.01)$ 0.67
(a) number of common shares outstanding at June 30, 2002:
125,729,542 (June 30, 2001: 162,499,266)
Methanex Corporation
Consolidated Balance Sheets June 30 December 31
(unaudited) 2002 2001
----------------------------------------------------------------------
(thousands of U.S. dollars)
Assets
Current assets:
Cash and cash equivalents $ 441,005 $ 332,129
Receivables 148,540 135,219
Inventories 88,326 99,908
Prepaid expenses 19,830 8,685
----------------------------------------------------------------------
697,701 575,941
Property, plant and equipment 1,060,142 1,031,716
Other assets 86,070 85,693
----------------------------------------------------------------------
$ 1,843,913 $ 1,693,350
----------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 106,023 $ 110,281
Current maturities on long-term
debt and other long-term
liabilities 154,676 154,693
----------------------------------------------------------------------
260,699 264,974
Long-term debt 449,656 249,535
Other long-term liabilities 79,591 78,911
Future income taxes 160,700 164,469
Shareholders' equity
Capital stock 516,820 538,151
Retained earnings 376,447 397,310
----------------------------------------------------------------------
893,267 935,461
----------------------------------------------------------------------
$ 1,843,913 $ 1,693,350
----------------------------------------------------------------------
Methanex Corporation
Consolidated Statements of Cash Flows 3 months 6 months
ended ended
(unaudited) June 30 June 30
----------------------------------------------------------------------
(thousands of U.S. dollars) 2002 2001 2002 2001
Cash flows from operating activities:
Net income (loss) $ 15,671 $ 40,319 $ (1,706)$ 109,097
Add (deduct):
Depreciation and amortization 28,959 26,824 57,012 54,284
Future income taxes (1,067) 8,510 (3,769) 16,822
Other 2,935 2,342 5,006 4,389
----------------------------------------------------------------------
Cash flows from operating
activities before undernoted
changes 46,498 77,995 56,543 184,592
Receivables and accounts payable
and accrued liabilities (13,468) (3,180) (22,264) 2,753
Inventories and prepaid expenses (9,712) (9,327) (633) (10,295)
Utilization of prepaid natural gas (274) (164) (484) (360)
----------------------------------------------------------------------
23,044 65,324 33,162 176,690
----------------------------------------------------------------------
Cash flows from financing activities:
Proceeds on issue of
long-term debt 200,000 - 200,000 -
Financing costs (5,776) - (5,776) -
Payment for shares repurchased (25,879) - (45,183) -
Issue of shares on exercise of
incentive stock options 3,550 1,846 4,695 6,362
Repayment of other long-term
liabilities (630) (898) (1,154) (1,863)
----------------------------------------------------------------------
171,265 948 152,582 4,499
----------------------------------------------------------------------
Cash flows from investing activities:
Plant and equipment
under development (46,927) - (77,782) -
Property, plant and equipment (1,233) (8,895) (2,629) (15,689)
Accounts payable and accrued
liabilities related to capital
expenditures 9,704 (200) 5,030 (428)
Other assets (1,464) 826 (1,487) 843
----------------------------------------------------------------------
(39,920) (8,269) (76,868) (15,274)
----------------------------------------------------------------------
Increase in cash and cash
equivalents 154,389 58,003 108,876 165,915
Cash and cash equivalents,
beginning of period 286,616 333,854 332,129 225,942
----------------------------------------------------------------------
Cash and cash equivalents, end
of period $441,005 $391,857 $441,005 $391,857
----------------------------------------------------------------------
Supplementary cash flow information:
----------------------------------------------------------------------
Interest paid, net of
capitalized interest $ - $ 128 $ 11,861 $ 15,474
Income taxes paid (received) $ (138)$ 9,122 $ 377 $ (6,465)
----------------------------------------------------------------------
Methanex Corporation Notes to Consolidated Financial Statements (unaudited) Six months ended June 30, 2002 The consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada. The consolidated financial statements have been prepared from the books and records without audit, however, in the opinion of management, all adjustments which are necessary to the fair presentation of the results of the interim period have been made. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Methanex 2001 Annual Report. Except with respect to the change in accounting policies described below, the accounting policies applied in these interim consolidated financial statements are consistent with those applied in the Annual Report. 1. Interest in joint venture: The Company has a 63.1% joint venture interest in Atlas Methanol Company ("Atlas"). The joint venture is constructing a 1.7 million tonne per year methanol plant in Trinidad. Construction is expected to be completed by the end of 2003. The consolidated financial statements include the following amounts representing the Company's interest in the Atlas joint venture:
($ thousands) June 30, 2002 December 31, 2001
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Consolidated Balance Sheet
Current assets $ 20,801 $ 1,995
Property, plant and equipment 127,656 63,131
Current liabilities 14,892 7,690
--------------------------------------------------------------------
($ thousands) Three months Three months Six Months Six Months
ended ended ended ended
June 30 June 30 June 30 June 30
2002 2001 2002 2001
--------------------------------------------------------------------
Consolidated Statement
of Cash Flows
Cash outflows
from investing
activities $ 28,258 $ - $ 57,323 $ -
--------------------------------------------------------------------
During the six months ended June 30, 2002, $3.6 million (June 30, 2001 - $nil) of interest was capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. to plant and equipment under development. To June 30, 2002, the joint venture had no revenue and all expenditures were capitalized to plant and equipment under development. The Company estimates that its remaining share of capital expenditures to complete the construction of Atlas will be approximately $139 million and will be incurred over the period to December December: see month. 31, 2003. The Company expects that these expenditures will be funded from project financing, cash generated from operations and cash and cash equivalents. The Company's total equity contribution to the joint venture, assuming project financing is arranged as planned, is expected to be approximately $100 million. At June 30, 2002, the Company estimates its future cash equity contribution to the project will be approximately $8 million. 2. Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. : On June 19, 2002 the Company completed the issue and sale of 8.75% senior notes due August 15, 2012 in an aggregate principal amount of $200 million. 3.Capital Stock and Share Repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. a) Changes in the capital stock of the Company during the period January January: see month. 1, 2002 to June 30, 2002 were as follows:
Number of Consideration
Common Shares ($ thousands)
----------------------------------------------------------------------
Balance, December 31, 2001 131,167,942 $ 538,151
Issued on exercise of incentive
stock options 270,000 1,145
Shares repurchased (3,108,000) (12,741)
----------------------------------------------------------------------
Balance, March 31, 2002 128,329,942 $ 526,555
Issued on exercise of incentive
stock options 599,600 3,550
Shares repurchased (3,200,000) (13,285)
----------------------------------------------------------------------
Balance, June 30, 2002 125,729,542 $ 516,820
----------------------------------------------------------------------
During the six months ended June 30, 2002, the Company repurchased for cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. 6.3 million common shares. The cost to acquire the shares in the amount of $45.1 million was allocated $25.9 million to capital stock and $19.2 million to retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. . b) On June 14, 2002 the Company completed a solicitation of consents to an amendment to the indenture to modify the limitation on restricted payments covenant relating to our 7.75% notes due August 15, 2005. Under the amended indenture, the Company is permitted to declare and pay up to $30 million of dividends in any twelve-month period while our consolidated net worth is less than $850 million. There is no restriction on paying dividends while consolidated net worth is above $850 million. 4.Net Income Per Share A reconciliation of the weighted average number of common shares is as follows:
Three months Three months Six Months Six Months
ended ended ended ended
June 30 June 30 June 30 June 30
2002 2001 2002 2001
----------------------------------------------------------------------
Denominator for basic
net income per share 126,965,224 162,371,459 128,291,902 161,772,225
Effect of dilutive
stock options 2,019,842 1,973,422 - 1,460,277
----------------------------------------------------------------------
Denominator for
diluted net
income per share 128,985,066 164,344,881 128,291,902 163,232,502
----------------------------------------------------------------------
5. Stock Options
(a) Incentive stock options:
Common shares reserved for incentive stock options at June 30,
2002 were as follows:
Options denominated Options denominated
in CAD$ in US$
Weighted Weighted
Number of Average Number of Average
Stock Exercise Stock Exercise
Options Price Options Price
----------------------------------------------------------------------
Outstanding at
December 31, 2001 8,690,750 $ 10.09 - $ -
Granted - - 2,449,000 6.45
Exercised (270,000) 6.73 - -
Cancelled (4,750) 7.35 - -
----------------------------------------------------------------------
Outstanding at
March 31, 2002 8,416,000 $ 10.20 2,449,000 $ 6.45
Granted - - 15,000 8.82
Exercised (599,600) 9.18 - -
Cancelled (25,275) 12.15 - -
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Outstanding at
June 30, 2002 7,791,125 $ 10.28 2,464,000 $ 6.46
----------------------------------------------------------------------
As at June 30, 2002, 6,225,531 incentive stock options were exercisable at an average price of CAD CAD: see computer-aided design. (Computer-Aided Design) Using computers to design products. CAD systems are high-speed workstations or desktop computers with CAD software. $11.01. (b) Performance stock options: As at June 30, 2002, 2,125,000 (December 31, 2001 - 2,125,000) performance stock options are outstanding and 708,333 will vest and be exercisable after September September: see month. 30, 2002. (c) Fair value method disclosure: Effective January 1, 2002, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. with respect to the accounting for stock-based compensation and other stock-based payments. The new recommendations require equity instruments awarded to employees and the cost of the service received as consideration to be measured and recognized based on the fair value of the equity instruments issued. Compensation expense is recognized over the period of related employee service, usually the vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period of the equity instrument awarded. Alternatively, the new recommendations permit the measurement of compensation expense for stock option grants to employees and directors that are not direct awards of stock, stock appreciation rights or otherwise call for settlement in cash or other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. by an alternative method and to provide pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma disclosure of the financial results using the fair value method. The Company has elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. to follow an alternative metho d and continue with the former accounting policy of recognizing no compensation expense when stock options are granted because the Company grants stock options with an exercise price based on the market price at the date of the grant. Had compensation expense been determined based on the fair value method, the Company's net loss and net loss per share for the six months ended June 30, 2002, would have been adjusted to the pro forma amounts indicated below:
Three months Six months
ended ended
($ thousands, except per share amounts) June 30, 2002 June 30, 2002
---------------------------------------------------------------------
Net income (loss) - as reported 15,671 (1,706)
Net income (loss) - pro forma 14,637 (3,081)
Net income (loss) per share - as
reported 0.12 (0.01)
Net income (loss) per share - pro
forma 0.12 (0.02)
---------------------------------------------------------------------
The pro forma amounts exclude the effect of stock options granted prior to January 1, 2002. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model option pricing model A mathematical formula for determining the price at which an option should trade. The model expresses the value of an option as a function of the value of the underlying asset, length of time until maturity, exercise price, yields on with the following assumptions: risk-free interest rate Risk-Free Interest Rate Describes return available to an investor in a security somehow guaranteed to produce that return. The risk-free interest rate compensataes the investor for the temporary sacrifice of consumption. of 5%, dividend yield of 0%, expected life of 5 years, and volatility of 35%. The weighted average fair value of stock options granted during the six months ended June 30, 2002 was $2.46 per share. 6. Natural Gas Production from the Company's New Zealand operations is dependent on the supply of gas from the Maui Maui (mou`ē), island (1990 est. pop. 82,500), 728 sq mi (1,886 sq km), second largest island in the state of Hawaii, separated from the island of Hawaii by the Alenuihaha Channel and from Molokai by the Pailolo Channel. field. We estimate that our current contracted natural gas entitlements are sufficient to operate the New Zealand plants at capacity for the equivalent of approximately two and one-half years. During 2001, the owners of the Maui field announced that the Maui reserves may be materially less than previously estimated and below the aggregate of contract quantities. This could potentially reduce the amount of contracted gas available to Methanex. The process to determine the available reserves in the Maui field is expected to be completed by the end of 2002. The Company is continuing to pursue acquisitions of additional gas to supply our New Zealand plants. However, there can be no assurance that we will be able to secure additional gas in New Zealand at commercially acceptable terms.
Quarterly History YTD
(unaudited) 2002 Q2 Q1
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Methanol sales volume
(thousands of tonnes)
Company produced product 2,920 1,489 1,431
Purchased product 325 129 195
Commission sales(1) 340 183 157
---------------------------------------------------------------------
3,584 1,801 1,783
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Methanol production
(thousands of tonnes)
North America 227 103 124
New Zealand 1,135 601 535
Chile 1,448 743 706
---------------------------------------------------------------------
2,810 1,447 1,365
---------------------------------------------------------------------
Methanol price(2)
($/tonne) 125 138 111
($/gallon) 0.38 0.42 0.33
Per share information
Net income (loss) $ (0.01) 0.12 (0.13)
Quarterly History YTD
(unaudited) 2001 Q4 Q3 Q2 Q1
---------------------------------------------------------------------
Methanol sales volume
(thousands of tonnes)
Company produced product 5,390 1,522 1,327 1,296 1,245
Purchased product 1,280 170 301 404 405
Commission sales(1) 720 169 184 146 221
---------------------------------------------------------------------
7,390 1,861 1,812 1,846 1,871
---------------------------------------------------------------------
Methanol production
(thousands of tonnes)
North America 445 127 123 93 102
New Zealand 2,133 592 520 447 574
Chile 2,783 662 710 708 703
---------------------------------------------------------------------
5,361 1,381 1,353 1,248 1,379
---------------------------------------------------------------------
Methanol price(2)
($/tonne) 172 115 147 200 225
($/gallon) 0.52 0.35 0.44 0.60 0.68
Per share information
Net income (loss) 0.46 (0.10) (0.15) 0.25 0.43
Quarterly History YTD
(unaudited) 2000 Q4 Q3 Q2 Q1
---------------------------------------------------------------------
Methanol sales volume
(thousands of tonnes)
Company produced product 5,815 1,324 1,398 1,548 1,545
Purchased product 814 305 245 133 131
Commission sales(1) 142 142 - - -
---------------------------------------------------------------------
6,771 1,771 1,643 1,681 1,676
---------------------------------------------------------------------
Methanol production
(thousands of tonnes)
North America 685 108 114 223 240
New Zealand 2,410 593 620 607 590
Chile 2,912 716 666 778 752
---------------------------------------------------------------------
6,007 1,417 1,400 1,608 1,582
---------------------------------------------------------------------
Methanol price(2)
($/tonne) 160 202 187 141 112
($/gallon) 0.48 0.61 0.56 0.42 0.34
Per share information
Net income (loss) 0.85 0.40 0.35 0.17 (0.06)
(1) Sales of product from Titan plant in Trinidad. Methanex markets
100% of Titan product.
(2) Produced and purchased product.
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